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115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-553
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NATIONAL STRATEGY FOR COMBATING THE FINANCING OF TRANSNATIONAL CRIMINAL
ORGANIZATIONS ACT
_______
February 13, 2018.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
[To accompany H.R. 4768]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 4768) to require the President to develop a
national strategy to combat the financial networks of
transnational organized criminals, and for other purposes,
having considered the same, reports favorably thereon with
amendments and recommends that the bill as amended do pass.
The amendments (stated in terms of the page and line
numbers of the introduced bill) are as follows:
Page 2, line 2, strike ``the Director'' and insert ``the
Director of the Financial Crimes Enforcement Network, the
Director of the United States Secret Service, the Director of
the Federal Bureau of Investigation, the Administrator''.
Page 3, line 11, after ``United States'' insert ``or to the
U.S. and international financial system''.
Page 3, line 12, after ``cyber criminals,'' insert
``kleptocrats,''.
Page 3, line 13, after ``relevant'' insert ``state and non-
state''.
Page 3, line 13, after ``including those'' insert
``threats''.
Page 3, line 17, after ``networks'' insert ``(including
terrorist organizations, if any)''.
Page 3, line 24, insert after ``including'' the following:
``money laundering using real estate and other tangible goods
such as art and antiquities,''.
Page 4, beginning on line 6, strike ``, quantifiable''.
PURPOSE AND SUMMARY
On January 11, 2018, Representative David Kustoff
introduced H.R. 4768, the ``National Strategy for Combating the
Financing of Transnational Criminal Organizations Act'', which
requires the President, acting through the Treasury Secretary,
in consultation with other officials, and appropriate Federal
banking agencies, to develop a national strategy to combat the
financial network of transnational organized criminals and
submit that strategy to Congress not later than one year after
the Act's enactment and biennially thereafter.
BACKGROUND AND NEED FOR LEGISLATION
The goal of H.R. 4768 is to establish a national strategy
to combat the financial networks of transnational criminal
organizations. Transnational criminal organizations involve
illicit business ventures by individuals working in more than
one country and commonly include money laundering, cyber-crime,
and the trafficking of drugs, humans, weapons, and endangered
species. The United Nations Office on Drugs and Crime (UNODC)
estimates that TCOs generate a total of $870 billion a year.
They raise money by exploiting global supply chains, and cyber
domains to move goods, people, services, money, and data. While
terrorists are driven by political or religious ideology, TCOs
are motivated by maximizing profits. While organized crime is
global, its effects are felt locally. Every day we lose
countless lives as a result of drugs, human trafficking, and
the like, and these illicit activities also undermine the
economic development of our country. TCOs threaten the security
and prosperity of countries throughout the Western Hemisphere
at an estimated cost of 3.5 percent of GDP to the region,
according to the Inter-American Development Bank.
The legislation outlines that this strategy includes an
identification and assessment of the most significant current
transnational organized crime threats to national security of
the United States or to the U.S. and international financial
system, including drug trafficking organizations, human
trafficking organizations, cyber criminals, state and non-state
actors, and kleptocrats. The bill also outlines that this
strategy identify individuals, entities, networks, and
terrorist organizations, if any, that provide financial support
or financial facilitation to these transnational organized
crime groups and an assessment of the methods through which
transnational organized crime groups launder illicit proceeds,
including money laundering using real estate and other tangible
goods such as art and antiquities, trade-based money
laundering, bulk cash smuggling, exploitation of shell
companies, and misuse of digital currencies and other cyber
technologies. The bill also calls for an assessment of the risk
to the financial system of the United States posed by these
transnational criminal networks.
H.R. 4768 also requires that the national strategy includes
a discussion of both the short-term and long-term goals,
objectives, priorities, and actions to combat the financing of
transnational organized crime groups and their facilitators.
The bill also requires that this strategy include a description
of how it is integrated into and supports the national security
strategy, drug control strategy, and counterterrorism strategy
of the United States. Finally, the bill requires that this
strategy review current efforts to combat the financing or
financial facilitation of transnational organized crime and, if
appropriate, suggest proposed legislative and regulatory
changes to address these issues.
In January 2010, the U.S. Intelligence Community completed
a comprehensive review of international organize crime--the
first on this topic since 1995. In July 2011, President Obama's
Administration published the ``Strategy to Combat Transnational
Organized Crime'', which concluded that transnational organized
crime has expanded dramatically in size, scope, and influence,
and that it poses a significant threat to national and
international security. The Strategy found that criminal
networks are building new alliances around the world and
engaging in a wide range of illicit activities, including
providing support for terrorism. These transnational organized
crime groups threaten U.S. interests by taking advantage of
failed states, forging alliances with corrupt foreign
government officials, expanding human and drug trafficking
networks, exploiting legitimate markets and economic activity
by concealing illicit assets in financial systems, and
perpetrating cybercrime which costs consumers billions of
dollars annually.
There is currently no statutory requirement to update this
paper. This legislation introduced by Representative Kustoff
would therefore be the first law to require an assessment of
such a TCO strategy, akin to the `national strategy for
combating terrorist and other illicit financing' provisions
found in Public Law 115-44, which President Trump signed into
law on August 2, 2017 as part of the Countering America's
Adversaries Through Sanctions Act, which mandated the
imposition of sanctions against Iran, Russia, and North Korea.
On February 9, 2017, President Trump also issued Executive
Order 13773 on ``Enforcing Federal Law with Respect to
Transnational Criminal Organizations and Preventing
International Trafficking,'' which demonstrates the Trump
Administration's commitment to combat TCOs to promote domestic
and international security. The Executive Order recognizes that
TCOs and subsidiary organizations--mostly transnational drug
cartels--have spread through the nation and threaten the safety
of our country.
HEARINGS
The Committee on Financial Services Task Force to
Investigate Terrorism Financing held a hearing entitled, ``A
Dangerous Nexus: Terrorism, Crime and Corruption,'' focused on
the growing threat of transnational organized crime on May 21,
2015.
COMMITTEE CONSIDERATION
The Committee on Financial Services met in open session on
January 17 and 18, 2018, and ordered H.R. 4768 to be reported
favorably to the House as amended by a recorded vote of 53 yeas
to 0 nays (Record vote no. FC-136), a quorum being present.
Before the motion to report was offered, the Committee adopted
amendments offered by Rep. Kustoff and Rep. Waters by voice
vote.
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
sole recorded vote was on a motion by Chairman Hensarling to
report the bill favorably to the House as amended. The motion
was agreed to by a recorded vote of 53 yeas to 0 nays (Record
vote no. FC-136), a quorum being present.
COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
PERFORMANCE GOALS AND OBJECTIVES
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
CONGRESSIONAL BUDGET OFFICE ESTIMATES
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, February 8, 2018.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4768, the National
Strategy for Combating the Financing of Transnational Criminal
Organizations Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Matthew
Pickford.
Sincerely,
Keith Hall,
Director.
Enclosure.
H.R. 4768--National Strategy for Combating the Financing of
Transnational Criminal Organizations Act
H.R. 4768 would require the President to develop a national
strategy to combat the financing networks of transnational
organized criminals. Transnational crime is coordinated across
borders and usually consists of money laundering, human
smuggling, drug trafficking, and cybercrime. Under the bill,
the President, acting through the Department of the Treasury
and in consultation with Departments of Defense, Homeland
Security, Justice, State, and the Office of the Director of
National Intelligence, would produce a strategy within one year
and update it every two years.
CBO cannot determine whether comprehensive information on
the financing of transnational organized criminal activity has
been collected by the government, although Executive Order
13773 instructed federal agencies to work together against
transnational criminals. If sufficient financing information is
already collected by the government, based on the cost of
similar activities CBO expects that implementing the bill would
require three employees (at a cost of about $150,000 a year for
each) to coordinate the work of more than 10 government
organizations. Thus, CBO estimates that implementing the bill
would cost around $450,000 annually and about $2 million over
the 2018-2022 period, subject to the availability of
appropriated funds. If financing information regarding
transnational organized crime is not currently collected by the
government, costs could be significantly higher.
Enacting the bill would not affect direct spending or
revenues; therefore, pay-as-you-go procedures do not apply.
CBO estimates that enacting H.R. 4768 would not increase
direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2028.
H.R. 4768 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Matthew
Pickford. The estimate was approved by H. Samuel Papenfuss,
Deputy Assistant Director for Budget Analysis.
FEDERAL MANDATES STATEMENT
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995.
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
ADVISORY COMMITTEE STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
APPLICABILITY TO LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
EARMARK IDENTIFICATION
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
DUPLICATION OF FEDERAL PROGRAMS
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
DISCLOSURE OF DIRECTED RULEMAKING
Pursuant to section 3(i) of H. Res. 5, (115th Congress),
the following statement is made concerning directed
rulemakings: The Committee estimates that the bill requires no
directed rulemakings within the meaning of such section.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
Section 1. Short title
This section cites H.R. 4768 as the ``National Strategy for
Combating the Financing of Transnational Criminal Organizations
Act of 2017''.
Section 2. National strategy
The President shall develop a national strategy to combat
the financial networks of transnational organized criminals,
through the Secretary of the Treasury, in consultation with the
Attorney General, the Secretary of State, the Secretary of
Homeland Security, the Director of National Intelligence, the
Secretary of Defense, the Director of the Financial Crimes
Enforcement Network, the Director of the Secret Service, the
Director of the Federal Bureau of Investigation, the
Administrator of the Drug Enforcement Administration, the
Commissioner of Customs and Border Protection, the Director of
the Office of National Drug Control Policy, and the Federal
functional regulators.
The President shall submit the national strategy to
Congress not later than one year after enactment of the Act,
and not less than every two years after initial submission. A
separate presentation may be made to Congress in a classified
annex for parts of the national strategy that involves
information that is properly classified.
Section 3. Contents of national strategy
The national strategy shall contain an identification and
assessment of the most significant current transnational
organized crime threats to national security of the United
States or to the U.S. and international financial system,
including drug trafficking organizations, human trafficking
organizations, cyber criminals, state and non-state actors, and
kleptocrats.
The national strategy shall identify individuals, entities,
networks, and terrorist organizations, if any, that provide
financial support or financial facilitation to these
transnational organized crime groups and an assessment of the
methods through which transnational organized crime groups
launder illicit proceeds, including money laundering using real
estate and other tangible goods such as art and antiquities,
trade-based money laundering, bulk cash smuggling, exploitation
of shell companies, and misuse of digital currencies and other
cyber technologies. The national strategy shall also contain an
assessment of the risk to the financial system of the United
States.
The national strategy shall contain a discussion of short-
term and long-term goals, objectives, priorities, and actions
for combatting the financing of transnational organized crime
groups and their facilitators. The national strategy shall
include a description of how it is integrated into and supports
the national security strategy, drug control strategy, and
counterterrorism strategy of the United States. Finally, the
national strategy shall contain a review of current efforts to
combat the financing or financial facilitation of transnational
organized crime and, if appropriate, suggest proposed
legislative and regulatory changes to address these issues.
Section 4. Definitions
Appropriate congressional committees are the Committee on
Financial Services, the Committee on Foreign Affairs, the
Committee on Armed Services, the Committee on the Judiciary,
the Committee on Homeland Security, and the Permanent Select
Committee on Intelligence of the House of Representatives; and
the Committee on Banking, Housing, and Urban Affairs, the
Committee on Foreign Relations, the Committee on Armed
Services, the Committee on the Judiciary, the Committee on
Homeland Security and Governmental Affairs, and the Select
Committee on Intelligence of the Senate.
Federal functional regulator has the meaning given that
term in section 509 of the Gramm-Leach-Bliley Act (15 U.S.C.
6809).
Transnational organized crime refers to those self-
perpetuating associations of individuals who operate
transnationally for the purpose of obtaining power, influence,
monetary or commercial gains, wholly or in part by illegal
means, while--(A) protecting their activities through a pattern
of corruption or violence; or (B) while protecting their
illegal activities through a transnational organizational
structure and the exploitation of transnational commerce or
communication mechanisms.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
H.R. 4768 does not repeal or amend any section of a
statute. Therefore, the Office of Legislative Counsel did not
prepare the report contemplated by Clause 3(e)(1)(B) of rule
XIII of the House of Representatives.
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